The demand for electric vehicles (EVs) in the Indian market is rapidly increasing. However, purchasing luxury electric cars in India could soon become more expensive. A tax panel has suggested increasing the GST on EVs priced above $46,000 (approximately ₹40 lakh). This could significantly impact sales for foreign companies like Tesla, Mercedes-Benz, BMW, and BYD.
The tax panel has recommended an 18% tax on electric vehicles priced below ₹40 lakh, up from the current 5%. If a car costs less than ₹40 lakh and the 18% tax is applied, its price could increase by up to ₹7.20 lakh. For cars priced above ₹40 lakh, a 28% tax is proposed, potentially increasing the car’s price by ₹14 lakh.
The GST Council, chaired by the Finance Minister and including representatives from all states, will discuss the proposal on September 3 and 4 and make the final decision.
The Indian EV market is currently small but growing rapidly. EVs accounted for only 5% of total car sales in the country between April and July 2025. However, EV sales increased by 93% during this period, reaching 15,500 units. The panel believes that the 5% tax rate aimed to promote EV adoption, but it is now also necessary to levy a separate tax on expensive cars.
If the new tax is implemented, domestic companies like Mahindra and Tata Motors will be less affected as most of their EVs are priced below ₹20 lakh. However, foreign companies could face a significant setback. For instance, Tesla recently launched the Model Y in India with a starting price of ₹59.89 lakh. Mercedes-Benz, BMW, and BYD also sell expensive EVs in India.
As of July 2025, Tata Motors led the Indian EV market with a 40% share. Mahindra held an 18% share, while BYD had 3%, and Mercedes-Benz and BMW together held a 2% market share. Tesla recently opened two new showrooms in India and has started taking bookings, but deliveries have not yet begun. Elon Musk has long criticized the 100% import duties on cars in India. If the GST is also increased, doing business in India could become even more challenging for companies like Tesla.